BFH rules on VAT for hotel services
The Bundesfinanzhof (BFH, Federal Fiscal Court) issued three judgments dated 21 May 2026 commenting on the VAT treatment of certain services in the hotel sector. The decisions concerned breakfast services, the provision of fitness and wellness facilities, parking spaces and access to Wi-Fi. The BFH press release on this matter is numbered 055/26 and dated 1 October 2026.
According to the decisions V R 8/26 (XI R 11/23; XI R 34/20), V R 10/26 (XI R 13/23; XI R 7/21) and V R 11/26 (XI R 14/23; XI R 22/21), breakfast services provided to hotel guests and the granting of access to fitness and wellness facilities do not fall under the tax reduction provided for in § 12 Abs. 2 Nr. 11 UStG (German VAT Act). The BFH did not consider this to constitute a breach of EU law.
The decisions follow the judgment of the Gerichtshof der Europäischen Union (CJEU, Court of Justice of the European Union) of 5 March 2026 in the joined cases C-409/24 to C-411/24. The CJEU proceedings were conducted under the designation J-GmbH, D, D GmbH & Co. KG. The BFH had previously referred the matter to the CJEU by orders of 10 January 2024 by way of requests for a preliminary ruling.
Statutory framework of the reduced tax rate
Reduction for short-term accommodation
§ 12 Abs. 2 Nr. 11 Satz 1 UStG provides for a reduced VAT rate of 7% for the letting of living and sleeping accommodation that a business operator makes available for the short-term accommodation of third parties. The same applies to the short-term letting of camping spaces.
However, under § 12 Abs. 2 Nr. 11 Satz 2 UStG, this reduction does not apply to services that do not directly serve the letting. This also applies where these services are covered by the consideration paid for the letting. Accordingly, a uniform or flat-rate hotel price does not automatically mean that all services included are subject to the reduced tax rate for accommodation.
Basis under EU law
Under EU law, the national provision is based on Art. 98 Abs. 1 and 2 in conjunction with Annex III Nr. 12 of Directive 2006/112/EC on the common system of value added tax. Under this provision, the Member States may apply one or two reduced rates, but only to supplies of goods and services in the categories set out in Annex III.
Under Annex III Nr. 12 of the VAT Directive, these categories include accommodation provided in hotels and similar establishments, including holiday accommodation, as well as the letting of camping sites and caravan parks. The CJEU confirmed that § 12 Abs. 2 Nr. 11 Satz 2 UStG is compatible with EU law, provided that the selective application remains limited to clearly defined aspects.
A key consideration in this context is tax neutrality in competition. Services such as breakfast, parking spaces, wellness offerings or Wi-Fi should not receive more favourable treatment solely because they are offered as part of a hotel stay, while comparable services offered by other providers may be subject to the standard tax rate.
Disputed periods and the significance of § 12 Abs. 2 Nr. 15 UStG
The BFH judgments concern periods in which restaurant and catering services, when considered independently, were still subject to the standard tax rate. The BFH judgments concern periods in which restaurant and catering services, with the exception of the supply of beverages, were still subject to the standard tax rate when considered independently due to the non-applicability of § 12 Abs. 2 Nr. 15 UStG.
The decisions therefore relate to the legal situation at that time. It does not follow from them that hotel breakfasts are always subject in full to the standard tax rate irrespective of the relevant service period. Rather, what was clarified was that the preferential treatment cannot be derived from § 12 Abs. 2 Nr. 11 UStG for accommodation.
For current periods, it must be taken into account that § 12 Abs. 2 Nr. 15 UStG has applied indefinitely since 1 January 2026. Under this provision, restaurant services are subject to the reduced tax rate, with the exception of beverages. For hotel breakfasts, this means, according to the administrative practice described in this respect, that a distinction must be made between the food component and the beverage component.
Proceedings V R 8/26: breakfast and provision of parking space
Breakfast service is not subject to the accommodation reduction
In the proceedings V R 8/26 (XI R 11/23; XI R 34/20), the BFH ruled that, by providing breakfast services to hotel guests, the claimant had supplied a service that was subject to the standard tax rate. Accordingly, the breakfast service was not covered by § 12 Abs. 2 Nr. 11 UStG.
The proceedings were based on the fact that the claimant operated a hotel and restaurant with 62 rooms. The existing car park had 33 parking spaces and could be used by hotel and restaurant guests without separate payment. In addition to overnight accommodation, hotel guests also received breakfast; where accommodation was provided without breakfast, an amount of EUR 4.50 was credited.
The BFH did not consider taxation of the breakfast service at the standard tax rate to constitute a breach of EU law. The allocation requirement under § 12 Abs. 2 Nr. 11 Satz 2 UStG therefore remained decisive for this constellation.
Parking spaces: further findings by the Finanzgericht required
With regard to the provision of parking space, the BFH considered that the matter was not ready for a final decision. The proceedings were remitted to the Finanzgericht (Fiscal Court).
In the second round of proceedings, the Finanzgericht must first clarify the preliminary question of whether there is any taxable supply for consideration at all in relation to the provision of parking spaces. According to the BFH’s reasoning, this depends in particular on whether the parking spaces were available not only to overnight and restaurant guests, but were also freely and gratuitously accessible to the general public.
In this context, the estimate of the extent of taxable supplies in the provision of parking spaces is also significant. According to supplementary published content of the decision, the specific estimate in the dispute was problematic because the assumed number of parked vehicles exceeded the number of available parking spaces.
Proceedings V R 10/26: parallel decision on breakfast
The proceedings V R 10/26 (XI R 13/23; XI R 7/21) also concerned breakfast services provided to hotel guests. The BFH likewise ruled that these are not subject to the reduced tax rate under § 12 Abs. 2 Nr. 11 UStG. The BFH did not find a breach of EU law in these proceedings either.
In the BFH’s view, the Finanzgericht had rightly assumed that, by providing breakfast services to hotel guests, the claimant had supplied a service subject to the standard tax rate. The claimant’s appeal on points of law was unsuccessful and was dismissed as unfounded.
The proceedings concerned a guesthouse in the disputed year 2013. The claimant offered overnight accommodation exclusively including breakfast at a flat total price. According to the decision, this circumstance also did not result in the breakfast service being included in the tax reduction for accommodation services via § 12 Abs. 2 Nr. 11 UStG.
Proceedings V R 11/26: fitness, wellness, parking spaces and Wi-Fi
Fitness and wellness facilities at the standard tax rate
In the proceedings V R 11/26 (XI R 14/23; XI R 22/21), the BFH ruled that, by making fitness and wellness facilities available to hotel guests, the claimant had supplied services that are subject to the standard tax rate. The tax reduction under § 12 Abs. 2 Nr. 11 UStG does not apply in this respect either.
The proceedings concerned the disputed year 2011. The claimant operated two hotels in Germany. In one of the hotels, fitness and wellness facilities were available to guests without any separately charged consideration being levied for this.
The BFH also did not consider the VAT treatment of these services at the standard tax rate to constitute a breach of EU law. Accordingly, the granting of access to fitness and wellness facilities is not subject to reduced taxation merely because it is offered in connection with the hotel accommodation.
Generally accessible parking spaces not a supply of other services for consideration
The BFH assessed the provision of parking spaces differently where these are freely and gratuitously available not only to a hotel’s overnight guests, but also to all other hotel visitors and to the general public. In such a constellation, according to the decision, there is no supply of other services for consideration.
The decisive factor was that, in this respect, the hotel guests did not receive any independently consumable benefit over the general public. In this scenario, the possibility of use did not depend on payment of the overnight accommodation charge.
Wi-Fi access not yet conclusively assessed
On the basis of the findings of the Finanzgericht, the BFH was unable to make a final decision on the provision of Wi-Fi. It remained unclear whether Wi-Fi access, similarly to the parking spaces, was generally freely and gratuitously accessible or whether it was available only to hotel guests.
The proceedings V R 11/26 were therefore also remitted to the Finanzgericht. The first-instance judgment of the Finanzgericht Niedersachsen (Lower Saxony Fiscal Court) of 19 August 2021 – 5 K 174/19 is published in EFG 2022, 140.
Assessment of the three BFH decisions
The decisions make clear that, for VAT purposes, a distinction must be made between different service components of a hotel offering. Short-term accommodation may fall under § 12 Abs. 2 Nr. 11 UStG, while additional services must be assessed separately.
The decisions give rise in particular to the following key points:
- Breakfast services provided to hotel guests are not subject to reduced taxation via § 12 Abs. 2 Nr. 11 UStG.
- Access to fitness and wellness facilities likewise does not fall under the accommodation reduction.
- In the case of parking spaces, it must first be examined whether there is any taxable supply for consideration at all.
- Parking spaces that are generally freely and gratuitously accessible may be non-taxable.
- In the case of Wi-Fi access, the actual access options and the group of users are decisive.
In the proceedings V R 8/26 and V R 11/26, the BFH set aside the first-instance judgments dismissing the claims and remitted the cases to the competent Finanzgericht for further hearing and decision. In the proceedings V R 10/26, the BFH dismissed the claimant’s appeal on points of law as unfounded.
Practical scope for the hotel industry and businesses
For businesses in the hotel industry, the decision is significant above all because it limits the scope of the tax reduction for accommodation services. A total price for overnight accommodation and further components does not mean that every included service is automatically subject to the 7% tax rate under § 12 Abs. 2 Nr. 11 UStG.
At the same time, the case law shows that non-inclusion in the accommodation reduction does not in every case directly lead to the application of the standard tax rate. In the case of the provision of parking spaces and Wi-Fi, the initial question may be whether any taxable supply for consideration is made at all.
The decisions also concern specific disputed periods with the legal situation applicable at the time. For later periods, further provisions, in particular § 12 Abs. 2 Nr. 15 UStG, may have to be taken into account separately. The tax authorities made adjustments to the Umsatzsteuer-Anwendungserlass (UStAE, German VAT Application Decree) for the changeover as of 1 January 2026; the relevant BMF-Schreiben (Federal Ministry of Finance circular) on the allocation of total purchase prices in the case of flat-rate prices in the hotel and restaurant sectors is dated 22 December 2025.
Frequently asked questions
BFH hotel breakfast VAT: does the reduced tax rate under § 12 Abs. 2 Nr. 11 UStG apply?
According to the BFH judgments of 21 May 2026, breakfast services provided to hotel guests are not subject to the tax reduction for accommodation services under § 12 Abs. 2 Nr. 11 UStG. For the disputed periods concerned, this led to the application of the standard tax rate.
BFH hotel parking spaces VAT: when is there no supply for consideration?
According to the BFH, the provision of parking spaces does not constitute a supply of other services for consideration if the parking spaces are freely and gratuitously available not only to hotel guests, but also to other visitors and the general public. In other constellations, further examination by the Finanzgericht may be required.
What practical consequences do the BFH judgments on breakfast, wellness, Wi-Fi and parking spaces have for hotel businesses?
Hotel businesses must assess individual service components separately for VAT purposes where the statutory requirements make this necessary. A flat-rate price for overnight accommodation with additional services does not automatically result in the application of the reduced accommodation tax rate to all components.
Tax law advice on VAT issues
The BFH decisions on reduced tax rates in the hotel sector show that the VAT classification of package services, additional offerings and flat-rate charges depends on the specific supply relationships and the relevant legal situation. MTR Legal Rechtsanwälte advises companies, investors and high-net-worth individuals on tax law issues with a commercial law dimension. Further information can be found under Legal advice in tax law.
